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Frequent Contributor

T-REA 10-Q, March 31,2019

https://www.sec.gov/Archives/edgar/data/946155/000162828019005981/tiaa-realestate03312019x10q.htm

Gross Assets  $29.239 billion

Liabilities  $2.917 billion

Net Assets  $26.322 billion [used for NAV $424.573, 3/31/19]

Investment Income  2.68% annualized

Expenses  0.84% annualized

TR 1.71% x 4 = 6.84% annualized

Line of Credit [LOC] $500 million [not used; cost 0.20% annual for line, or $300K /quarter]; option for additional $250 million. [This LOC hasn't been explained so far]

REITs  3.9% of Grosss Assets [4.33% of Net Asstes] - down

Treasuries/Agencies  14.7% of Gross Assets [16.33% of Net Assets]

Recent Transactions are on pg 54.

Subsequent Transactions [3/31/19-5/7/19] - didn't find any

YBB
13 Replies
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Participant ○

Re: T-REA 10-Q, March 31,2019

Thank you, Yogi, for keeping us informed.

Doesn't a quarterly return of 1.71% annualize to 7.02%?  Not that I expect that much for the year, given that the second quarter hasn't done as well so far as the first.

John

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Frequent Contributor

Re: T-REA 10-Q, March 31,2019

Yes. compounded 1.0171^4 = 1.0702, or 7.02%. But extrapolation from Q1 may be wishful thinking.

YBB
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Re: T-REA 10-Q, March 31,2019

Thank you, Yogi. Maybe my new avatar is consistent with a "wishful thinking" approach. Lay back rather than run with the fast crowd, and survive for a strong stretch run. This avatar is of the thoroughbred "Silky Sullivan." My hero in the late 1950's. A style that I myself took as a middle-distance runner in track in highschool. I won my league (conference) championship, using a come-from-behind approach in the half-mile (880 yard) run.  https://www.youtube.com/watch?v=FT_YxcoDhtY

Insight into the enigmatic Silky Sullivan.
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Frequent Contributor

Re: T-REA 10-Q, March 31,2019

@Juris2 . I change my Avatar after several posters mentioned what's that pink-rabbit [auto-assigned by M*] about? Strange how Avatar is being used now in social-media - in Indian mythology, Avatar is how gods/deities descend/materialize on earth. Are we all gods/deities (-:)

https://community.morningstar.com/t5/forums/forumtopicprintpage/board-id/dotcom/message-id/555/print...

YBB
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Participant ○○

Re: T-REA 10-Q, March 31,2019

I received a copy of the QREARX prospectus in the mail today, dated May 1, 2019.

A small slice of paper was inserted in the envelope. It reads:

"The liquidity risk component of the TIAA Real Estate Account separate account annual charge will increase from 0.20% to 0.24%, beginning August 1, 2019, which adversely impacts your cost to hold the account. After this charge takes effect, the estimated separate account annual charge in total will be 0.83%. The contractual maximum separate account annual charge is 2.50%. For more information regarding the expenses of the Account, please refer to the May 1, 2019 prospectus.

TIAA is including this notice in order to comply with the requirements of the New York Department of Financial Services Insurance Regulation 210."

A QUESTION (added). I assume this is only a part of the TREA liquidity guaranty (passed on to the investor/member). Does TIAA have a separate insurance or guaranty account to cover TREA in case of a commercial real estate market collapse? ANSWER: there's an extended discussion of this beginning on page 49 of the prospectus. That discussion notes, among other things, that the liquidity guarantee has not been exercised since June 2009.

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Frequent Contributor

Re: T-REA 10-Q, March 31,2019

Juris,

I have always assumed that’s a risk assumed by the TIAA General Account. I recall several ratings agencies, in the past, citing the General Account's exposure to real estate.

Further, in the electronic. notice I received  (I no longer get them in the mail) attention was drawn to the longstanding fact that TREA's ER can, contractually, go as high as 2.5.

TIAA can also shut down TREA.  That's in my contract as well.

Bob

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Re: T-REA 10-Q, March 31,2019

@Juris2 . I don't see any alternative to Liquidity Guarantee. But I have been asking what is this $500 million line of credit [unused, but TIAA pays at least 0.20% annually for it] plus $250 million option about?

YBB
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Re: T-REA 10-Q, March 31,2019

"Avatar is how gods/deities descend/materialize on earth. .."

Look at my Avatar. I picked it from the web that reflects my actual name.

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Re: T-REA 10-Q, March 31,2019


@ECEPROF wrote:

"Avatar is how gods/deities descend/materialize on earth. .."

Look at my Avatar. I picked it from the web that reflects my actual name.


True, Natarajan = Dancing Shiva. A classic pic. But you have changed your UserID. 

YBB
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Re: T-REA 10-Q, March 31,2019

It's not at all unusual for a business to have an open line of credit. Relative to assets, it’s a very modest amount.

Back in my publisher days, we had an open line of credit (with a lot fewer zeroes!). We used it from time to time opportunistically--e.g., when an unplanned project fell into our hands and we wanted to get it out quickly.

Bob

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Re: T-REA 10-Q, March 31,2019

@GLI2019 . OK, paying $250-300 K per quarter for unused line of credit since mid/late-2018 when the fee for Liquidity Guarantee has also gone up? It doesn't compute. I initially thought that this was going to serve as a relief for Liquidity Guarantee, but there has been no info so far. There is also a huge double-digit Treasury/Agency component that T-REA has to carry as part of Liquidity Guarantee. The CRE cycle may also be peaking.

YBB
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Re: T-REA 10-Q, March 31,2019

"It's not at all unusual for a business to have an open line of credit. Relative to assets, it’s a very modest amount."

+1

It has been very helpful for us during the last 8 years since we established LOC. I currently do not owe anything. The $50 annual fee is worth because I can borrow up to 50 k any time. I have used it for two down payments and other purposes. Three years ago, the bank (First Tenn) gave me interest free loan that I could borrow up to 50 k (my limit). I did borrow 25 k interest free and paying it back slowly. This interest free thing is still going on by rolling over interest free loans from the other banks. I still owe about $8.5 k of that money now to Wells Fargo. What did I do with the money? It is making money in the market. LOC is a very useful tool. I learnt the advantage only after retirement. The house was paid in early 1990's (Bush I was president then) and the equity was stuck. My son gave me the idea of setting up LOC and borrowing from LOC.  Right now, First Tenn. has increased the interest rate to 5.5%. If the interest rate comes down, we will use this money for down payment to buy another property.

Speaking of my son, he says that he is never going to pay the loan from the TIAA bank fully even after retirement because the interest rate is low while you can make more money in market in the long term.

Added:

I have no opinion on the charges TREA pays for the LOC since it seems a large amount for every quarter.

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Re: T-REA 10-Q, March 31,2019

I hear you, Yogi. 

But I am not privy to TIAA's business strategy.

In the past, TIAA was criticized for issuing surplus notes and buying Nuveen and EverBank.**

And yet TIAA's ratings remain superior:

Moody's AA1

S & P AA+

A M Best A++

Fitch AAA

 I am not going to second guess TIAA.

Bob

**Contrary to the criticism TIAA received re the Surplus Notes and purchases, they are perceived as strengths, for example, in this ratings analysis.

https://www.marketwatch.com/press-release/am-best-affirms-credit-ratings-of-teachers-insurance-and-a...

But note the cautionary comments on TIAA's real estate exposure:

"Although A.M. Best believes any near-term asset impairments for the group will be more than offset by net operating gains, it remains concerned regarding the group’s sizeable and increasing exposure to real estate assets and Schedule BA assets. A.M. Best believes the potential remains for material credit losses from TIAA’s real estate holdings should the global economy deteriorate."

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